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In The Meantime.

And that's the week.

Like every other day, Friday began and ended with Donald Trump.

He started the day with the obligatory predawn dose of xenophobia, reminding everyone that Messicans are, generally speaking, criminals. As you can see, he also conjured the World War Z images again, suggesting that the border is “under siege”, a laughable characterization for any number of reasons, not the least of which is that, by virtue of being arbitrary lines on a map and therefore not real things, “borders” cannot be besieged.

After plugging Lou Dobbs, screaming at NBC and reminding you (and himself) that Dallas is in fact still in Texas, he shrieked about the one bright spot in the jobs report before delivering what is perhaps the greatest non sequitur in the history of non sequiturs:

Yes, “unemployment falls below 4%” and “in the meantime, WITCH HUNT!”

That’s definitely how normal people behave. It’s like when I go to Kroger, pick up an apple, hold it in the air and say “Red Delicious! And in the meantime, GERBILS!”

So there was that and then, as teased in his early morning rantings, he showed up in Texas several hours later to speak at the NRA’s annual meeting which is obviously a great idea from a PR perspective given recent events. That speech went off the rails pretty much immediately. I’ll post some of the videos later, but for now, here are the bullet points:



I mean – I don’t even know how to respond to that, but gun stocks sure did, surging to session highs after Trump said this:

Your second Amendment rights are under siege, but they will never, ever be under siege as long as I’m your president.


Stocks staged an impressive rally Friday and thanks to that stick save, the S&P was basically a wash this week:


You should thank Apple:


And you should thank grandpa for Apple:

Argentina pulled a Tony Montana on Friday, hiking for the third time in a week, in a truly desperate attempt to put the brakes on the peso’s slide. It seems to be working – for now.


Credit Suisse has something interesting out this afternoon about this situation. Give this a quick skim:

Retrospectively, the BCRA hiked rates already by 1,250bps from 27.25% to 40%. Since last Wednesday the BCRA sold $4.7bn or 8% of international reserves (intervention from early March reached $7.7bn or 13% of international reserves – Figure 1).

What do we think from here? Many investors asked us yesterday if we are close to the bottom. This is a tricky question to answer even after today’s announcements. We think it is too soon to call the bottom but below we give three short reasons why we think we might be closer to a new equilibrium.


Rates have overshot and now are north of 30%-40% (the front end of the Lebac curve was at almost 40% while 1m NDF implied yields are even higher using yesterday’s closing levels since at the time of writing there are no real indications – Figure 2). Real rates, depending on which measure we look at, are between 14.6% (ex-post) and approximately 20% (ex ante). If an investor buys the September Lebac at a 34% yield, the breakeven FX in five months would be close to 26 pesos per dollar meaning that a further 14% depreciation is needed to start losing money.


So you know, maybe the bottom is (almost) in. Any takers?

Moving right along to other problems in the EM space, the lira hit another fresh record low and there’s speculation that CBT is going to have to figure out a way to convince Erdogan to permit an emergency rate hike before this really spirals out of control. The inflation picture is worsening quickly. Things calmed down a bit over the course of the day on Friday, but it’s bad:


Local and hard currency now red in EM bonds YTD:


Crude is hanging out at a three-and-a-half-year high. We’re eying $70 on WTI – this is all about the Iran deal at this point. If you’re an oil bull, thank the “Bolton premium”.


Third straight week of gains for the dollar as Fed expectations and rising yields continue to squeeze the spec short:


Notably, the post-payrolls dip was a mere blip on the radar screen:


The bid for Treasurys was similarly fleeting following the payrolls and AHE miss:


“People don’t want to admit that we’re still faced with a deluge of supply that isn’t really going to hit until the second half of this year and next year,” Nomura’s George Goncalves, said Friday. “It makes people think twice about chasing rallies too deeply, even on weak data, so long as it doesn’t alter the trajectory for growth that much.”

The yellow line is (still) like Frederick Douglass: “something that is doing a great job and getting noticed more and more.”


Ok, that’s enough.

For your moment of zen, we’ll leave you with some “dragon energy”:


1 comment on “In The Meantime.

  1. Great stuff thanks for all these relevant posts!

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